Qantas Airways (ASX: QAN) and Emirates have been given the green light to extend their alliance to trans-Tasman routes, the final hurdle to forming their alliance.
Today the New Zealand government gave approval for the alliance to fly between Australian and New Zealand destinations over five years. That follows on from approval by the Australian Competition and Consumer Commission (ACCC), two months ago, although the ACCC imposed conditions on Qantas and Emirates to maintain their current level of capacity on trans-Tasman routes.
New Zealand's transport minister, Gerry Brownlee said in a statement that travellers and exporters would benefit from strengthened connections on the Emirates' international network. Trans-Tasman competition will be maintained through existing carriers and the threat of entry by new carriers.
Virgin Australia Holdings (ASX: VAH) and Air New Zealand (ASX: AIZ) are currently seeking approval for an extension of their alliance on the trans-Tasman route. A decision is expected from the New Zealand regulator by September this year.
Both Virgin and Air New Zealand had raised concerns over the Qantas-Emirates tie up, suggesting any conditions imposed on specific routes has the potential to create harmful market conditions. Air New Zealand currently owns 17.7% of Virgin, with Singapore Airlines owning 19.9% and Etihad Airways holding 8.5%.
Qantas has already reported positive results from the alliance with Emirates, as the Flying Kangaroo looks to turnaround its loss-making international division. Now that it has approvals for all aspects of the alliance, the company will have the certainty to go ahead fully with integration plans.
Passengers are winners too, with news last month that flights to London were around $900 cheaper than the previous year. Singapore Airlines has taken advantage of Qantas flying through the mid-east, instead of Asia, to Europe, offering consumers more options for stopovers on the Kangaroo Route.
Foolish takeaway
We have yet to see the Qantas-Emirates alliance translate into an improvement in the local airline's international division, but that doesn't appear to be too far off.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
